Creating a passive income stream with just one stock is possible but it’s usually not advisable, especially if you are working with a substantial amount of capital.
A diversified portfolio of dividend stocks within your Tax-Free Savings Account (TFSA), which allows you to actually access the passive income your dividend stocks are creating (tax-free), is considered more practical.
But it doesn’t mean that a substantial portion of your passive income cannot come from a single stock. Suppose you have access to a reliable dividend stock with a solid payout history, a healthy business model, and a promising future that is heavily discounted and offers a generous yield.
As a result, you can park a sizable amount of your capital in that stock. One such candidate is Telus (TSX:T).
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Telus’ dividend yield and history
Telus is a telecom giant in Canada and one of the oldest dividend aristocrats – with 19 consecutive years of dividend growth.
The company is still raising its payouts and maintaining its status as an aristocrat, even though the payout ratio is dangerously high. But the financials of the company are stable and net income has improved in Q2 compared to Q1, by a significant margin.
The company also experienced a massive surge of new subscribers for their connected devices segment compared to Q2 2023. So, even if the payout ratio looks dangerous, the underlying fundamentals are solid.
The performance is another weak point of the stock, but it can also be considered a blessing from the dividend perspective. The stock is trading at a 35% discount from its five-year peak and this slump has pushed the yield up to a juicy 7%. At this rate, you can generate about $175 a month if you invest a bit less than a third of a fully stocked TFSA in this stock – $30,000.
The company
There are several reasons why Telus is a compelling choice for parking a substantial portion of your TFSA savings, starting with its position as a giant in the telecom industries (one of the three) and a blue-chip stock. Its stellar dividend growth history is another reason.
The business model is quite similar to that of other telecom giants in the country, but Telus has a slight edge. It is also emerging as a leader in two other spaces – home security and telehealth.
Telehealth is a market segment with enormous potential, even though it may take some time to gain significant traction parallel to conventional healthcare. As a leader in this rapidly evolving field, Telus may gain an early bird advantage and cover a considerable market segment before this space gets crowded.
Foolish takeaway
Telus is a robust dividend stock, especially now that the slump has pushed its yield up. It’s also stable enough to divert a sizable amount of your total available investment capital. More importantly, it may also prove to be a decent pick from a capital appreciation perspective when it goes bullish again.
In the last decade, Telus’ performance has been significantly better than that of the other two telecom giants in the country, and if it reiterates its history, it can become an attractive pick for more than just passive income.
